This paper investigates the effect of a China’s government policy, which forces a public
accounting firm to enhance its production scale, technical efficiency and economies of scale.
We apply and estimate a standard input distance frontier using data on the top 100 Chinese
accounting firms covering 2008-2009. We find that the larger the firm size is, the more
technically efficient it is, thus justifying policy enforcement. Furthermore, economies of
scale prevail in the top 100 accounting firms and are not exhausted, supporting that these
firms keep extending their production scale to reduce their long-run average costs. Empirical
results reveal that larger accounting firms have more competitive advantage.